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What Are the Different Types of Credit Risk Software?

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  • Written By: Helen Akers
  • Edited By: Jessica Seminara
  • Last Modified Date: 07 November 2016
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Credit risk software helps banks and lending institutions evaluate consumer creditworthiness with built-in automated scoring methods. Businesses can also use credit risk software to evaluate the risk involved in certain capital projects and investments. There are a variety of software vendors that supply and customize applications depending upon the types of evaluations that need to be performed. Some of those software programs deal exclusively with capital portfolio management, including tools to measure a project's expected internal rate of return.

Organizations that hold consumer mortgages and automobile loans use credit risk software to make an unbiased decision about which loan applications to approve. These types of software programs combine a consumer's credit report score with data related to his job status, length of employment, judgment or lien history, income, payment defaults and the amount of requested loan funds. Instead of having several individuals try to make a subjective credit risk analysis, the software program can produce an objective "yes" or "no" decision within seconds.

Corporations use a different type of credit risk software to help them analyze the risks involved in capital projects. These software suites include functions that measure expected performance of a capital investment throughout its lifetime. They also help evaluate whether a project conforms to a corporation's standards and specifications. One of the unique features of this type of credit risk software is that it lets users simulate several different scenarios to see how the capital project will perform under various conditions.

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Many of the calculations that are used to evaluate the viability of capital projects, including the internal rate of return and the yield curve analysis, are built into credit risk software programs. The tools also allow companies to be able to keep track of and manage several projects at once. Accounting activities, histories, and reports are also generated from these types of credit risk management programs.

There are some types of credit risk software programs that allow companies or individuals to manage their investment portfolios. They help keep track of different types of investments that might make up a firm's capital structure, including equity, debt, derivatives and options. Web-based functions and technology are integrated into the software applications to allow for access to current interest rates and trading information. This information can help a firm evaluate whether it is more risky to issue debt or equity to finance its operations or if it should readjust its capital structure to reflect a heavier concentration in one type of funding.

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NathanG
Post 3

@runner101 - One of the ironic things about asking for your credit score from one of the three agencies is that the very act of asking for your score could adversely affect your credit.

This is also something to consider if you take out too many loans; the credit agency will write something like “too many inquiries” into the file that they have on you.

For this reason it’s not recommended that you inquire more than once a year. Of course if you subscribe to a credit risk monitor service then they can stay on top of anything that may be adversely impacting your score.

runner101
Post 2

@Tomislav - My husband works in real estate and do not fear bad credit there are people who are really good at helping you budget and make you look better on a company's financial risk software by increasing your credit score.

They know the particulars just like you were discussing such as how having a certain number of credit cards open or even not having enough credit history can affect that all important number.

I am a huge fan of word of mouth business so I would ask around to find someone else that has been helped by someone who specializes in credit score improvement.

I know that can sound embarrassing to ask others about increasing your credit

score, but I think you would be surprised at just how many people have crazy credit scores, because sometimes it is not even something you did, but rather inaccurate information on your file that causes a score to be off.

Then I would imagine you would be on your way to looking like less of a business credit risk by increasing your credit score!

Tomislav
Post 1

I have seen the commercials about free credit reports but was curious as to why you have three credit scores. Now I see that on top of your credit score businesses have data and credit risk systems to help them decide your financial risk.

If you have bad credit is there any way to increase how your financial situation looks on these credit risk software programs? I realize paying off loans and having money in the bank are no brainers to increasing your score, but I have heard the credit score can be quite a bit more complicated than this.

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